The Labour Sector in Sri Lanka

by padraigcolman

The annual report, published in July 2013, of the Ministry of Finance and Planning shows public investment in the human resource sector increased by 50% percent in 2012 compared to 2007. The outlook should be good for the labour sector.

However, one should beware of complacency. There is still a place for visionary government guidance and responsible trade unionism. In Europe, critics on the left believe that the EC has been deregulating the labour market to the detriment of workers. Small groups of non-representative workers (‘yellow’ unions set up by the company itself) have been authorised to set wages at a reduced level. “Reforms” in wage-setting systems have become more “employment-friendly” in the aftermath of the financial crisis. That means “employer” friendly. Benefits have decreased; the prevalence of fixed-term contracts has increased, with a resulting insecurity for workers.

An estimated 62% of Sri Lanka’s workers are in the informal sector. Informal agricultural employment is rising, while formal employment in the industrial sector is declining. Sri Lanka’s social protection coverage for working people is limited to the formal sector and workers in the informal sector cannot rely on trade unions to protect their rights.

This is not necessarily good for the economy as a whole. Steven Kapsos of the ILO (International Labour Organisation) said: “You need to ask which industries have the greatest potential for driving both employment growth and value-addition in the years ahead”. The ILO says industrial and agricultural productivity is below potential and increasing services productivity would have a large impact. The service sector is unlikely to be worker-friendly.

It is possible for an economy to have high unemployment levels and suffer skills shortages simultaneously. The economy will suffer if there is a skills mismatch. The ILO says the labour force in Sri Lanka can be increased, despite an aging population, if high unemployment rates among young people and women are addressed.

In 2009, a report on Labour and Social Trends in Sri Lanka looked ahead to 2020 and identified key challenges and opportunities. The report recommended:

  • ensuring that workers have fundamental protections without  constraining growth prospects;
  • ensuring that the  “peace dividend” results in productive investments that yield long-term benefits
  • education should promote marketable skills.

A report prepared in 2004 for NATURE (National Association for Trade Union Research and Education) by Muttukrishna Sarvananthan noted that: “There appears to be a mismatch between supply and demand due to faulty education system in Sri Lanka”. He described Sri Lankan education as “archaic” and unfitted to a flexible modern private sector.

The  IPS (Institute of Policy Studies) in its 2012 annual report said: “A young, educated and growing labour force can stimulate economic growth. An older work force will be slower to innovate and adopt new technologies unless they are retrained constantly.” Sri Lanka’s total labour force growth is slowing and the proportion of the workforce aged above 30 is growing, while the proportion below 30 is shrinking.

According to Chatura Rodrigo of the IPS, there is room for optimism.  14.6 % of Sri Lankan youth were below the poverty line during the period of 2006/07. This figure reduced to 8.9% by 2009/10.

Nevertheless, youth unemployment is still cause for anxiety. It worries me to see aggressive young men drifting around villages. Many young people perceive Sri Lankan society as unjust, and are frustrated by the failure of mainstream institutions to address inequalities. Since before they were born, conflict absorbed vital resources that could have been used for improvements. Shortcomings in education and lack of opportunity were recruiting agents for both the JVP and the LTTE. Today, many private sector jobs are on a contract basis and job security is low. Dr Sarvananthan found in 2004 that public sector employment was the preferred option for most young people because of security and pension prospects.  However, this sector is everywhere shrinking and in the 21st century, the private sector must be the main driver of any economy.

The Ministry of Youth Affairs and Skills Development (MYASD) set up the Youth Parliament in 2011 to enable young people to participate in policy debates, and to groom future leaders. The government is formulating a National Action Plan (NAP) for Youth Employment “to ensure that talents and aspirations of youth in relation to the labour market are fulfilled”.  The NAP identifies four key labour market areas:

  • equal opportunity
  • employment creation
  • employability
  • entrepreneurship.

In each of these areas, the report reviews key policies and programmes and identifies the main issues and constraints.

“Deriving from this analysis and based on widespread consultations, a National Action Plan will be formulated, consisting of detailed policy recommendations and providing concrete proposals of policies and programmes.”

Unemployment among educated youth is too high because they are holding out for better employment opportunities. Many disadvantaged or frustrated youths turned to violence as a result of exclusion. It could happen again.